Wednesday, September 22, 2010

I attended the annual fall meeting of the Council of Institutional Investors over the past couple of days in San Diego. The council is a non-profit organization that exists to represent the interests of American pension funds with combined assets of more than $3 trillion (that's trillion with a "t"). The council's views on how our largest companies are run matter because, unlike many large institutional or mutual fund companies, these pension funds aren't afraid to rock the boat and speak up to corporate management.

The pension fund world sits at an interesting crossroads between Wall Street and Main Street. The people who oversee these substantial assets in their plans have to be sophisticated enough to understand how Wall Street works and the games that Wall Street plays to benefit itself (and not always the shareholders). However, these investors also live in the same world as their pensioners. They are keenly aware of their responsibilities to their members and the real-world challenges that their members face each day.

The keynote speaker for the conference was Neel Kashkari, the former Goldman Sachs banker, who worked in the Treasury Department under Hank Paulson and later oversaw the $700 billion Troubled Assets Relief Program. Now Kashkari works for Pimcocreating a new active equities program for the global asset manager.

Kashkari's talk was the standard Pimco "new normal" pitch, but it was enhanced with his views from three years spent on Capitol Hill. He said that he was amazed that both parties had come together to pass TARP. He confessed he didn't think that they would beforehand. He had believed -- based on his time in Washington -- that politicians could only respond after a crisis, not in anticipation of one.

Although most of the pension fund audience told me they thought very highly of Kashkari's talk later, there was no shortage of people lined up to challenge him during the Q&A session of his talk. He gamely tried to answer the questions of why Treasury couldn't save Lehman Brothers but just two days later saved AIG(AIG) . (His answer, which is a variation of Paulson's revisionist explanation, is that Lehman didn't have the collateral to pledge against a bailout while AIG did, giving Treasury the authority to act in one situation while not in the other).

However, the big questions posed by this audience to Kashkari were: "How can Wall Street, so quickly, start repaying itself huge bonuses when the rest of America is hurting?" and "When and how are things going to start to get better for the rest of America?"

I attended the annual fall meeting of the Council of Institutional Investors over the past couple of days in San Diego. The council is a non-profit organization that exists to represent the interests of American pension funds with combined assets of more than $3 trillion (that's trillion with a "t"). The council's views on how our largest companies are run matter because, unlike many large institutional or mutual fund companies, these pension funds aren't afraid to rock the boat and speak up to corporate management.

The pension fund world sits at an interesting crossroads between Wall Street and Main Street. The people who oversee these substantial assets in their plans have to be sophisticated enough to understand how Wall Street works and the games that Wall Street plays to benefit itself (and not always the shareholders). However, these investors also live in the same world as their pensioners. They are keenly aware of their responsibilities to their members and the real-world challenges that their members face each day.

The keynote speaker for the conference was Neel Kashkari, the former Goldman Sachs banker, who worked in the Treasury Department under Hank Paulson and later oversaw the $700 billion Troubled Assets Relief Program. Now Kashkari works for Pimcocreating a new active equities program for the global asset manager.

Kashkari's talk was the standard Pimco "new normal" pitch, but it was enhanced with his views from three years spent on Capitol Hill. He said that he was amazed that both parties had come together to pass TARP. He confessed he didn't think that they would beforehand. He had believed -- based on his time in Washington -- that politicians could only respond after a crisis, not in anticipation of one.

Although most of the pension fund audience told me they thought very highly of Kashkari's talk later, there was no shortage of people lined up to challenge him during the Q&A session of his talk. He gamely tried to answer the questions of why Treasury couldn't save Lehman Brothers but just two days later saved AIG(AIG) . (His answer, which is a variation of Paulson's revisionist explanation, is that Lehman didn't have the collateral to pledge against a bailout while AIG did, giving Treasury the authority to act in one situation while not in the other).

However, the big questions posed by this audience to Kashkari were: "How can Wall Street, so quickly, start repaying itself huge bonuses when the rest of America is hurting?" and "When and how are things going to start to get better for the rest of America?"

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